2/18/2010 @ 2:10PM

Priceline Rallies After Big Profits

A strong earnings report from
Priceline.com
reinforced hopes that the travel industry could be making a comeback, but investors are concerned about one of its online booking rivals.

On Thursday
Priceline.com
made gains after reporting its fourth-quarter profits jumped to $78.5 million, or $1.55 per share, compared with $34.1 million, or 75 cents per share, in the year-ago quarter. Excluding stock-option costs, depreciation and amortization, the company earned $1.99 per share. Sales for the period hit $541.8 million, up 33% from $406 million in the fourth quarter of 2008.

Priceline beat The Street’s earnings call of $1.68 per share on sales of $529.8 million. Shares of the Norwalk, Conn.-based company were among the best performers in the S&P 500, leaping $20.61, or 9.7%, to $233.48.

The online travel-booking company attributed its strong results to an increase in bookings compared with a weaker travel environment a year ago amid the worst of the recession. The company made particular note of an increase in international booking sales, which jumped 75% to $222.9 million in the fourth quarter. Chief Executive
Jeffery
Boyd
Jeffery Boyd
said that international bookings were helped by Priceline’s “geographic expansion, increased hotel supply and a consumer shift to online bookings.”

JPMorgan Chase analyst Imran Khan believes Priceline’s Name Your Own Price business “continued to drive market share gains from competitors.” Khan wouldn’t be so quick to project big international growth for Priceline though. While international growth did contribute heavily to the company’s quarterly gains, the business is composed “mainly of small independent hotels that are limited as to how aggressive they can be in marketing directly in online channels.”

Meanwhile, Scott Barry of Credit Suisse notes that the company has “strong secular tailwinds,” adding that the rationale to own the stock remains “sustainable strong growth driven by deployment of a proven potent agency distribution model against an attractive $300 billion global lodging market opportunity.”

Priceline said it expects the first quarter of 2010 to produce profits between $1.54 and $1.64 per share on a year-over-year sales hike between 23% and 27%. Analysts expect a profit of $1.41 per share on sales of $584.8 million, or a 27% increase over the first quarter of 2009.

While investors might be quick to attribute Priceline’s share gains–the stock is up nearly 60% over the past six months–to an improved travel market, investors in rival
Expedia
which has lagged with just a 3.5% six-month gain, might argue otherwise. Last week the Bellevue, Wash.-based travel-booking company said it would pay a quarterly dividend of 7 cents per share, but the news sent shares sliding. Analysts and investors were skeptical as to why a seemingly fast-growing company like Expedia would dole out money to shareholders rather than invest in its business. (See “Expedia Profits, But Dividend Raises Concerns.”)